As rates on savings accounts threaten to disappear into nothing, the latest jobs report did nothing to provide a boost. The report on May job growth from the Bureau of Labor Statistics (BLS) was pretty much right down the middle -- not disappointing, but not a pleasant surprise either. That kind of mediocre showing is not likely to move interest rates higher, especially when it comes to rates on savings accounts and other deposits.
Mediocre employment growth
The BLS reported last week that a net total of 175,000 new jobs were created in May. That almost exactly matches the average of 172,000 new jobs that have been created monthly over the past year. In other words, May's job growth was about average by recent standards, though a little below average if you subtract the 12,000 jobs represented by downward revisions of previous months' employment estimates. Between tepid job growth and growth in the labor force, the unemployment rate was virtually unchanged in the latest report, at 7.6 percent.
What does this job market information say about the economy? It places the economy in the same holding pattern it's been in for about four years now: growing, but not gaining any momentum. The soft job market is both a symptom and a cause of this problem. Employers lack the confidence in the economy to start hiring in big numbers. In turn, with people only slowly able to return to work, just a trickle of new wages are being introduced into the economy. The other element that has influenced interest rates is the Federal Reserve's monetary stimulus. The Fed has stated that it will continue measures to keep interest rates down until unemployment falls to 6.5 percent. With unemployment treading water at 7.6 percent, the Fed looks as though it will keep downward pressure on rates for the next several months.
A double standard for interest rates
Along with mixed news on the economy, there has also been something of a double standard on how banks are setting their interest rates.